ConocoPhillips May Buy Rival for $31 Billion

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ConocoPhillips May Buy Rival for $31 Billion

12/13/2005

NEW YORK--ConocoPhillips is in advanced talks to buy Burlington Resources, one of the largest independent oil companies in the country, for more than $31 billion, executives involved in the negotiations reported in The New York Times .

The acquisition would give ConocoPhillips -- the nation's third-largest oil company with approximately 1,700 retail units -- control of important natural-gas exploration areas in the United States, where Burlington has been using new drilling technologies in its search for new reserves. Other major oil companies, including ExxonMobil and Royal Dutch Shell, have been moving aggressively in recent months to increase their own natural-gas production in this country, The Times reported.

Talks between ConocoPhillips and Burlington are near completion, the executives said in report, but they warned that it was still possible the negotiations could collapse. If a deal is reached, it could be announced as early as this week. Details of the terms of the transaction under discussion could not be learned, The Times reported.

Houston-based Burlington has more than 2,200 workers and about 12 trillion cubic feet equivalent of natural-gas reserves, mostly in North America. However, the acquisition would also help ConocoPhillips internationally, expanding its reach in countries like Ecuador and Canada where Burlington has made inroads, according to The Times .

A spokesman for Burlington declined to comment. A representative for ConocoPhillips could not be reached, The Times reported.

ConocoPhillips, a company formed through a string of earlier mergers, has been using acquisitions to help it grow. In late November, for instance, it acquired an oil refinery in Germany from a private concern, Louis Dreyfus, in a deal valued at about $2.5 billion, according to Deutsche Bank.

The transaction also signals an ambition by the chief executive of ConocoPhillips, James J. Mulva, to eventually secure a seat at the table with the elite international energy companies like ExxonMobil, Chevron, BP and Royal Dutch Shell. ConocoPhillips is the largest energy company in Houston, but it has been unable to attain the extensive international reach of its larger competitors, The Times reported.

According to The Times report, a deal with ConocoPhillips would also keep a foreign company from buying Burlington, though it is still possible one could submit a bid in the next several days.

Cash to finance such deals is not an issue. ConocoPhillips, for instance, had net income of $3.80 billion in the most recent quarter, up from $2.01 billion from the same period a year earlier. Revenue at the company was $49.66 billion, compared with $34.74 billion in the year-earlier period. Earnings at other large energy companies are expected to remain near record levels through the end of this year.

ConocoPhilips could be buying Burlington at the height of the market, analysts said in the report. As natural-gas prices have soared, so have Burlington's shares -- they have almost doubled in the past year.